Coinbase, the prominent cryptocurrency exchange, is facing significant pushback from traditional banking institutions regarding its application for a National Trust Company Charter. The application, submitted in October 2023, aims to create a bridge between the cryptocurrency sector and conventional finance. The Independent Community Bankers of America (ICBA) has expressed strong opposition, arguing that the move could jeopardize the interests of banks as Coinbase seeks to expand its services.
In a letter addressed to the Office of the Comptroller of the Currency (OCC), the ICBA criticized Coinbase’s proposal, labeling various aspects of the cryptocurrency custody process as “untested.” The banking group also raised concerns about the potential profitability of Coinbase’s trust charter, particularly during market downturns, stating that the subsidiary might “struggle to achieve and maintain profitability during crypto bear markets.”
Paul Grewal, Coinbase’s chief legal officer, responded to the ICBA’s stance in a post on X, formerly known as Twitter. He accused the organization of prioritizing its own interests by attempting to create regulatory barriers. “It’s another case of bank lobbyists trying to dig regulatory moats to protect their own,” Grewal stated.
The ICBA’s letter urged the OCC to either reject Coinbase’s application outright or allow for an extended public review process. The group emphasized the need to consider the “legal, prudential, and public interest implications” of such a charter. Reports suggest that the OCC’s review process for Coinbase’s application could take between 12 and 18 months.
Coinbase has clarified that its intention is not to operate as a traditional bank but rather to enhance its offerings in the rapidly evolving financial landscape. This application aligns with a broader trend, as other cryptocurrency companies, including Ripple Labs and Circle, have also sought banking licenses following recent legislative developments aimed at establishing frameworks for payment stablecoins.
As Coinbase navigates this regulatory landscape, the OCC’s decision regarding Ripple’s application is also anticipated. Although the review was scheduled to conclude last week, no official announcement had been made by the government department by the time of publication.
The increasing tension between cryptocurrency exchanges and traditional banks highlights a pivotal moment in the financial sector, where innovation in digital assets is met with resistance from established institutions. As both sides prepare for what could be a lengthy regulatory process, the outcome may have lasting implications for the future of cryptocurrency in the United States.